Empowering retail investors and strengthening EU financial markets

Background

The European Commission introduced the Retail Investment Strategy (RIS) in response to several structural weaknesses in the European investment landscape. Today, only 17% of EU households participate in financial markets, while retail investors continue to face higher costs than institutional players. Trust also remains an issue: a significant share of individual investors report limited confidence in financial intermediaries, which directly hampers market participation.

Against this backdrop, the RIS aims to empower retail investors, reduce unnecessary costs and restore trust in financial services, ultimately supporting deeper and more dynamic EU capital markets.

Current state of play

After lengthy negotiations, the European Parliament and the Council reached a political agreement in December 2025. Although the legal texts are not yet formally adopted, the direction of travel is clear. Firms subject to PRIIPs, MiFID, IDD, Solvency II, UCITS and AIFMD should prepare for material regulatory and operational changes.

Key implications for financial institutions

The forthcoming updates will affect business models, compliance frameworks and operational processes. The actual impact will largely depend on existing levels of transparency, current marketing practices, the way information is provided to retail investors, advisors’ qualifications, and the range of products distributed.

While most of these topics are familiar to compliance officers and product owners, the RIS introduces a stronger focus on coherence across sectoral regimes, aiming to reinforce investor protection without adding unnecessary administrative complexity.

From an impact perspective, five key workstreams can already be identified for an effective gap analysis.

  1. Inducements

Updated rules reinforce the obligation for firms and advisers to act honestly, fairly and professionally, with the client’s best interests at heart.
Inducements will need to be clearly disclosed and separated from other fees and commissions, and firms must demonstrate that any inducement delivers a tangible benefit for the client.

  1. Value for money

Ensuring value for money becomes a central pillar of the RIS. Firms will be required to assess all costs and charges, enabling retail investors to better compare products and understand whether the expected benefits justify the costs.

This assessment will rely on standardised methodologies, including peer-group comparisons under MiFID, UCITS and AIFMD. For insurance-based investment products, supervisory benchmarks – including national benchmarks rolled out over four years – will apply.

Standardisation also extends to disclosure formats. Updated KID templates will be developed by the European Supervisory Authorities, and machine‑readable disclosures will become mandatory 30 months after the new PRIIPs rules enter into force.

  1. Client experience

Financial literacy is explicitly recognised as a prerequisite for better investment decisions. The RIS introduces a simplified advisory framework for recommendations relating to diversified, non-complex and cost‑efficient products. In such cases, advisers will no longer be required to assess the client’s knowledge and experience as part of the suitability assessment.

This represents a meaningful shift towards a more proportionate and client-friendly approach.

  1. Marketing and ‘finfluencers’

Marketing and communication standards are further strengthened. Information addressed to retail investors must be clear, fair and not misleading, across all distribution channels.

Special attention is paid to social media and financial influencers, with enhanced monitoring of investment-related communications to mitigate the risk of misleading advice.

  1. Professional clients

Changes are also introduced in the criteria allowing individuals to opt up to professional client status. To qualify, individuals must meet two out of three conditions, including revised thresholds for transaction activity, portfolio size and professional experience or education. These adjustments aim to increase consistency while preserving appropriate investor protection.

Key takeaways

The Retail Investment Strategy confirms a clear strategic ambition: broader retail participation, stronger investor trust and more efficient EU financial markets. Rather than a regulatory revolution, the RIS represents a logical evolution of existing frameworks, albeit with potentially significant impacts for some firms.

A thorough gap analysis is essential to assess readiness and identify areas requiring adaptation. Beyond compliance, success will depend on the ability to design practical, proportionate implementation strategies that enhance transparency and client experience without introducing end‑to‑end process inefficiencies.

Ultimately, a robust, user‑friendly and non‑misleading client journey is the key to engaging retail investors and supporting sustainable market growth.

Nicolas Fortomaris, Investment specialist DynaFin Consulting

 

Sources
  • Eurostat 2021
  • ESMA costs and performance report 2024,2025
  • Eurobarometer 2023
  • European Union publications, 2023
  • Consilium press releases, 2025